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Pole

Case Against Privatisation Of Public Services

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While reading some 19th century books I came across this article. I can't believe how little has changed since nearly 120 years ago. Most of the points in the article are still valid today - especially when you think about how much private companies are charging people for gas, electricity, rail travel, etc.

The article is from 1895 and is called "Social Upbuilding" and was written by E. D. Babbitt, LL. D., of the College of Fine Forces, New Jersey:

"Sixty-eight governments own their telegraph lines.

"Fifty-four governments own their railroads in whole or in part, while only nineteen, the United States among them, do not.

"In Australia one can ride 1,000 miles (first class) across the country for $5.50, or six miles for 2 cents, and railroad men are paid more for eight hours labor than in the United States for ten hours. Does this impoverish the country? In Victoria, where these rates prevail, the net income for 1894 was sufficient to pay the federal taxes.

"In Hungary, where the roads are state-owned, one can ride six miles for a cent, and since the government bought the roads, wages have doubled.

"In Belgium, fares and freight rates have been cut down one-half and wages doubled. But for all that the roads pay a yearly revenue to the government of $4,000,000.

"In Germany, the government-owned roads will carry a person four miles for a cent, while the wages of the employees are 120 per cent higher than when the corporations owned them. Has such a system proved ruinous? No. During the last ten years the net profits have increased 41 per cent. Last year (1894), the roads paid the German government a net profit of $25,000,000.

"It has been estimated that government ownership of railroads would save the people of the United States a billion dollars in money and give better wages to its employees, two millions of whom would doubtless then be needed instead of 700,000 as at present.

"Berlin, Germany, is called the cleanest, best paved and best governed city in the world. It owns its gas works, electric lights, water works, street railways, city telephones, and even its fire insurance, and thus makes a profit every year of 5,000,000 mark, or $1,250,000, over all expenses. In that city the citizens can ride five miles as often as they please every day in the whole year for $4.50, while two trips a day on the elevated railroads of New York would cost $36.50.

"Mr. F. G. R. Gordon has given in the Twentieth Century the statistics with reference to lighting a number of American cities and finds that the average price of each arc light by the year, when under municipal control, is $52.12 1/2 while the average price paid to private parties by the various cities is $105.13 per light each year, or a little more than twice as much as when run by the cities themselves.

"The average price for telegrams in the United States in 1891 was thirty-two and a half cents. In Germany, where the telegraphs are owned by the government, messages of ten words are sent to all parts of the country for five cents. From the greater distances and higher prices for labor, here, we would probably have to pay from five to twenty cents, according to the distance. The remarkable advantage of having each municipality control its own gas, water, coal and street railways, has been demonstrated by Birmingham, Glasgow and other cities in Great Britain."

Edited by Pole

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Class post.

Everything that gets privatised gets worse.

Indeed. We can only live in hope that they renationalise eye care and bring back NHS specs. Our children are missing out on easy bullying opportunities thanks to private eye care. :angry:

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The "choice" I got from the privatisation of the Utilities, is the choice of

which middle-man sends me the bill! :huh:

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Garet Garrett's ' The Driver' focuses on the big money controlling the railroads (and the scramble for dominance) at the turn of the 19th/20th Century and can be downloaded (audio) here for free (start from bottom up). It is also a good social critique of the times.

Hard Money advocates may find chapter IV interesting in particular

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The "choice" I got from the privatisation of the Utilities, is the choice of

which middle-man sends me the bill! :huh:

For natural monopolies like these, you have a choice:

- Either have them run by a career engineer who thinks that £70k p.a. is a fantastic wage and is mildly obsessed with ensuring the best water supplies/most reliable electricity/etc - possibly at a small price premium, OR..

- Run by a selection of private outfits, run by MBAs who think that £70k a month is poverty, who want to slash costs and spare capacity even though that hits reliability, will hike prices to whatever they can get, and have to be reigned in by government bureaucrats - themselves on more than £70k p.a - who may or may not exert any influence.

And there always the option of private equity coming in and stripping every last penny out of the business.

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For natural monopolies like these, you have a choice:

- Either have them run by a career engineer who thinks that £70k p.a. is a fantastic wage and is mildly obsessed with ensuring the best water supplies/most reliable electricity/etc - possibly at a small price premium, OR..

- Run by a selection of private outfits, run by MBAs who think that £70k a month is poverty, who want to slash costs and spare capacity even though that hits reliability, will hike prices to whatever they can get, and have to be reigned in by government bureaucrats - themselves on more than £70k p.a - who may or may not exert any influence.

And there always the option of private equity coming in and stripping every last penny out of the business.

Or, more ideologically, do you want a monopoly under democratic control, or a monopoly under no control at all?

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While reading some 19th century books I came across this article. I can't believe how little has changed since nearly 120 years ago. Most of the points in the article are still valid today - especially when you think about how much private companies are charging people for gas, electricity, rail travel, etc.

The article is from 1895 and is called "Social Upbuilding" and was written by E. D. Babbitt, LL. D., of the College of Fine Forces, New Jersey:

"Sixty-eight governments own their telegraph lines.

"Fifty-four governments own their railroads in whole or in part, while only nineteen, the United States among them, do not.

"In Australia one can ride 1,000 miles (first class) across the country for $5.50, or six miles for 2 cents, and railroad men are paid more for eight hours labor than in the United States for ten hours. Does this impoverish the country? In Victoria, where these rates prevail, the net income for 1894 was sufficient to pay the federal taxes.

"In Hungary, where the roads are state-owned, one can ride six miles for a cent, and since the government bought the roads, wages have doubled.

"In Belgium, fares and freight rates have been cut down one-half and wages doubled. But for all that the roads pay a yearly revenue to the government of $4,000,000.

"In Germany, the government-owned roads will carry a person four miles for a cent, while the wages of the employees are 120 per cent higher than when the corporations owned them. Has such a system proved ruinous? No. During the last ten years the net profits have increased 41 per cent. Last year (1894), the roads paid the German government a net profit of $25,000,000.

"It has been estimated that government ownership of railroads would save the people of the United States a billion dollars in money and give better wages to its employees, two millions of whom would doubtless then be needed instead of 700,000 as at present.

"Berlin, Germany, is called the cleanest, best paved and best governed city in the world. It owns its gas works, electric lights, water works, street railways, city telephones, and even its fire insurance, and thus makes a profit every year of 5,000,000 mark, or $1,250,000, over all expenses. In that city the citizens can ride five miles as often as they please every day in the whole year for $4.50, while two trips a day on the elevated railroads of New York would cost $36.50.

"Mr. F. G. R. Gordon has given in the Twentieth Century the statistics with reference to lighting a number of American cities and finds that the average price of each arc light by the year, when under municipal control, is $52.12 1/2 while the average price paid to private parties by the various cities is $105.13 per light each year, or a little more than twice as much as when run by the cities themselves.

"The average price for telegrams in the United States in 1891 was thirty-two and a half cents. In Germany, where the telegraphs are owned by the government, messages of ten words are sent to all parts of the country for five cents. From the greater distances and higher prices for labor, here, we would probably have to pay from five to twenty cents, according to the distance. The remarkable advantage of having each municipality control its own gas, water, coal and street railways, has been demonstrated by Birmingham, Glasgow and other cities in Great Britain."

And in Russia, it presently costs 135 million Euros to build 1 km of road in St Petersburg. :lol:

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- Run by a selection of private outfits, run by MBAs who think that £70k a month is poverty, who want to slash costs and spare capacity even though that hits reliability, will hike prices to whatever they can get, and have to be reigned in by government bureaucrats

Yes but those MBAs might quit and go work somewhere else if they don't get what they want :lol:

Edited by Toto deVeer

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- Run by a selection of private outfits, run by MBAs who think that £70k a month is poverty, who want to slash costs and spare capacity even though that hits reliability, will hike prices to whatever they can get, and have to be reigned in by government bureaucrats - themselves on more than £70k p.a - who may or may not exert any influence.

And there always the option of private equity coming in and stripping every last penny out of the business.

It gets even worse if those 'private outfits' are not even based in the same country. It's just an overseas investment for them and they might have very little interest in making it sustainable.

I remember Poland in the early 90s was selling its infrastructure because it needed capital.

But why does the UK need to get rid of its family silver???

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Productivity is good for citizens and generally speaking private companies are a lot more productive than state companies.

I think the article is missing a key point in that certain products prices are highly dependant on the volume of sales. That is to say if you have a railroad system that costs £100m pa and you have 10m journeys it will cost you £10 a trip.

If you increase this to 20m journeys the cost might only be £110m or £5.50 a trip.

Americans don’t use railroads much because the freeways are quite good and fuel is quite cheap so not a fair comparison.

I suppose a good one to look at would be electricity prices.

The average yank earns more than the average European yet they pay about 40% less for their electricity. That is to say they pay their electricity workers more and charge less for the electricity at least partly thanks to the earlier privatisation of the electricity markets.

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For natural monopolies like these, you have a choice:

- Either have them run by a career engineer who thinks that £70k p.a. is a fantastic wage and is mildly obsessed with ensuring the best water supplies/most reliable electricity/etc - possibly at a small price premium, OR..

- Run by a selection of private outfits, run by MBAs who think that £70k a month is poverty, who want to slash costs and spare capacity even though that hits reliability, will hike prices to whatever they can get, and have to be reigned in by government bureaucrats - themselves on more than £70k p.a - who may or may not exert any influence.

For natural monopolies like issuing the means of exchange, you have a choice:

- Either have them run by career civil servants who think that £70k p.a. is a fantastic wage and are mildly obsessed with ensuring the best security/most reliable service/etc OR..

- Run by a selection of private outfits, run by MBAs who think that £70k a month is poverty, who will hike prices to whatever they can get, and have to be reigned in by government bureaucrats - themselves on more than £70k p.a - who may or may not exert any influence (that's the FSA).

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<_<

That’s the thing you cant be greedy in a competitive market because the moment you make excessive profits or what you are in is becoming very profitable you have every tom dick and Harry wanting a piece and pushing prices down.

However in many industries and sectors there are virtual monopolies in which case you either break up the monopoly or shouldn’t have privatised it in the first place.

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That’s the thing you cant be greedy in a competitive market because the moment you make excessive profits or what you are in is becoming very profitable you have every tom dick and Harry wanting a piece and pushing prices down.

However in many industries and sectors there are virtual monopolies in which case you either break up the monopoly or shouldn’t have privatised it in the first place.

Agreed.

Also, you can usually buy shares in successful companies (if they have floated), should you want a piece of the profit.

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Agreed.

Also, you can usually buy shares in successful companies (if they have floated), should you want a piece of the profit.

What if you can't afford shares, and all you want is affordable gas, water and electricity?

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Why can't the public services be run more like private businesses? Why is there so much waste in public run services?..What we need is well run efficient public services that make a profit that is rolled over to benefit all, it can be done otherwise why would a private company want to take a public service over, it must have profit potential otherwise they wouldn't do it. ;)

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The argument that privatisation makes for a worse service deserves some examination.

BT - in the good old days, it took at least a month to get a phone line, and it look at least a week to get it fixed. Seems a lot better now.

Railways - OK, they used to be a lot cheaper, but they were also very shit. When I started work 20 years ago, you flew to Manchester from London. It wouldn't cross my mind to do that now, the trains are far, far better. Virgin is having all sorts of trouble on that route because the government owns the rolling stock, so there is no capacity. The implementation of that privatisation was indeed daft.

BP - recent troubles aside has been transformed from an also ran into a global player.

Water/Gas - the service is actually pretty good, especially in terms of customer facing stuff. It is a hell of a lot better than it was 20 years ago. I don't think a state owned company would be any cheaper.

BA - would have ended up like Alitalia and gone bankrupt if it had stayed in state hands

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Why can't the public services be run more like private businesses? Why is there so much waste in public run services?..What we need is well run efficient public services that make a profit that is rolled over to benefit all, it can be done otherwise why would a private company want to take a public service over, it must have profit potential otherwise they wouldn't do it. ;)

I can assure you that private industries waste just as much! I just had to do a course about "avoiding violence in the workplace"!

Everyone has to do it, and I never havehad a fight with any of my colleagues, so it must have worked then? :huh:

Or is it ********!

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I can assure you that private industries waste just as much! I just had to do a course about "avoiding violence in the workplace"!

I can't think of a company that wants to do this sort of stuff. Unfortunately they exist in a (government) legislative environment that accuses them of being negligent if they don't do it.

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The argument that privatisation makes for a worse service deserves some examination.

BT - in the good old days, it took at least a month to get a phone line, and it look at least a week to get it fixed. Seems a lot better now.

Yes it did rxe, and I was the apprentice doing it! :huh:

I am quite happy that telecoms is in private hands, along with iPlops, and motor manufacture!

It's a different deal with the stuff you actually need!!

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I can assure you that private industries waste just as much! I just had to do a course about "avoiding violence in the workplace"!

Everyone has to do it, and I never havehad a fight with any of my colleagues, so it must have worked then? :huh:

Or is it ********!

Health and safety.....we had to do a course on how to operate a fire extinguisher, and how not to trip over electrical leads...this is all new policy that is mostly common sense. :huh:

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For natural monopolies like these, you have a choice:

- Either have them run by a career engineer who thinks that £70k p.a. is a fantastic wage and is mildly obsessed with ensuring the best water supplies/most reliable electricity/etc - possibly at a small price premium, OR..

But I am in agreement with you fluff! Look what happened to the Gas Board!

Their chief bod went from a "very good wage" to bankster's money, and he didn't complain!

I hope I never have to "fix" his boiler! :(

Because I probably would! ;)

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British Gas

British Airways

British Telecom

British Petroleum

etc etc

Those comapnies were called British becasue they were owned by the British public. Now, why are those private companies (today) still allowed to use 'British' in their names? And anyway, why continue using 'British' if it's not British anymore?

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